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XRpro Resurrects Icagen With Buy of Some Pfizer Ion Channel Assets

[Updated 7/2/15, 10:38 am. See below.] Finding new drugs can be challenging, time consuming, and expensive. But Cambridge, MA, drug discovery company XRpro Sciences believes it can make the process faster and more efficient, and it’s scooping up some North Carolina-based assets from Pfizer to do it.

XRpro said today it has acquired drug discovery technology from Pfizer (NYSE: PFE) that the giant drug maker originally obtained in 2011 when it bought Durham, NC-based Icagen. XRpro could pay as much as $1.3 million for the Icagen assets, plus additional payouts linked to revenue, according to securities filings.

Nearly two decades old when Pfizer acquired it, Icagen’s expertise was discovering compounds that have an effect on ion channels, which are protein membranes that control the flow of charged particles—ions, such as sodium and potassium—in and out of cells. (The first three letters of Icagen stand for “ion channel advances.”)

XRpro plans to use that old Icagen ion-channel expertise—and rebrand itself with the old name, as well—to help other companies search for new drugs. The cost of discovering and developing new drugs is on the rise as pharma companies face increasing pressures to cut expenses—which leads to more outsourcing of work, XRpro CEO Richie Cunningham says.

XRpro acquired from Pfizer the Icagen technology, name, and trademark, Cunningham says. The Icagen drugs that Pfizer acquired, as well as compounds that Icagen discovered and developed within Pfizer, are not part of the deal.

Douglas Krafte, an Icagen employee since the early 1990s and now the new company’s chief scientific officer, will oversee the old Icagen team of 18 working in labs just outside of Research Triangle Park. XRpro, now renamed, will be headquartered in Cambridge, where it currently employs ten people.

The acquisition of Icagen’s assets is part of a broader strategy shift for the Massachusetts company, which was founded in 2003 at the Los Alamos National Laboratory in New Mexico. Known at the time as Caldera Pharmaceuticals, the company developed an x-ray fluorescence technology, Cunningham says. The x-rays cause individual atoms to glow. That glow can be used to measure nanograms of material.

While Caldera initially applied the technology to nuclear research, the company also saw potential applications in measuring the chemical composition of drugs. Research contracts with the Department of Defense and the National Institutes of Health accounted for XRpro’s slim 2014 revenues—just over $500,000, according to securities filings.

A year and a half ago, Caldera brought on former Valeant Pharmaceuticals (NYSE: VRX) CEO Timothy Tyson as the company’s chairman. Tyson believed that the company could find a broader use of the technology—and make more money—by working with pharmaceutical companies.

“What we were lacking, and needed, was expertise in the ion channel,” Cunningham says.

Caldera relocated to Cambridge and changed its name to XRpro to highlight its x-ray technology. It also hired Cunningham, another Valeant veteran, as CEO. In its search for ion channel expertise, XRpro found Pfizer. Talks with Pfizer led to a deal. According to a copy of the agreement filed with the SEC (XRPro is still private, but it is an emerging growth company with plans to go public, and it has chosen not to keep its filings confidential) XRpro is paying $500,000 up front and another $375,000 in installments. XRpro will pay another $500,000 in two years, if its continued collaboration with Pfizer generates at least $4 million in revenue. The agreement also calls for XRpro to pay Pfizer 10 percent of its revenue each quarter, starting in 2017. Those quarterly payments top out at $10 million. [Paragraph updated to provide deal details from securities filings.]

XRpro isn’t getting all the Icagen assets from Pfizer. The most advanced compound from that partnership is a drug candidate whose effect on the sodium ion channel mediates the sensation of pain. That drug is still in clinical development, Krafte says, and Pfizer is holding onto it, as well as other Icagen drug candidates. Pfizer will also keep Icagen’s library of 200,000 compounds.

Krafte says the new Icagen won’t need that library. Going forward, the company will be a provider of drug discovery services, working with the libraries of its pharma and biotech clients. In that sense, the new Icagen will be similar to X-Chem, a drug discovery startup that is also based in Cambridge. X-Chem, which was acquired last year by Wilmington, NC-based contract research organization PPD, has its own proprietary drug discovery platform that it uses in partnerships with Roche, AstraZeneca, Bayer, and Pfizer. Beryllium, another drug discovery startup based in nearby Bedford, MA, has worked with Pharmasset and The Broad Institute.

Cunningham hopes to announce partnerships soon. He says his company is already working with three of the top five pharmas. The only partner Cunningham can disclose is Pfizer, which has signed on to a two-year collaboration in which the new Icagen will continue to provide Pfizer with drug discovery and development services. According to that agreement, Pfizer guarantees at least $1 million in business to the new Icagen each year. [Information from securities filings added to give additional detail on the Pfizer collaboration.]

Though Icagen and Pfizer’s early partnership was on pain drugs, the new Icagen’s platform will not be limited to any particular therapeutic area. Ion channels are found in nearly every cell in the human body, and the new Icagen could help clients find drugs candidates in a wide range of diseases, Krafte says. Cunningham won’t rule out his company developing its own compounds, if the opportunity arises. But for now, the new Icagen is focused on building pipelines for other companies.

“It’s not an easy space, so you need expertise to understand and expedite,” Cunningham says. “If not, you’re going to have a lot of failures as you get into the process.”